Feds Lone AIG $85 Billion

Yesterday marked a dark day for the stock market, with the Dow Jones crashing 500 points following news of the bankruptcy of Lehman Brothers. Now the biggest insurance company in the nation, American International Group Co., or AIG, is failing as well. In order to save the ailing company, the U.S. government agreed to fund $85 billion to the company in order to prevent a chaotic stock market crash. The failure of AIG could lead to more destruction in the already fragile economy, as well as "substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance." In return for the loan, the Fed will receive a 79.9% equity stake in the company.

"It might not just bring down other financial institutions in the U.S. It could bring down overseas financial institutions," said Timothy Canova, a professor of international economic law at Chapman University School of Law. "If Lehman Brother's failure could help trigger AIG's going down, who knows who AIG's failure could trigger next.*"

*Taken from Yahoo!